Kinder Morgan, Inc. Increases Quarterly Dividend to $0.40 Per Share

HOUSTON--(BUSINESS WIRE)-- Kinder Morgan, Inc. (NYS: KMI) today increased its quarterly cash dividend to $0.40 per share ($1.60 annualized) payable on Aug. 15, 2013, to shareholders of record as of July 31, 2013. This represents an increase of 14 percent from the second quarter 2012 cash dividend per share of $0.35 ($1.40 annualized) and is up from $0.38 per share ($1.52 annualized) for the first quarter of 2013.

For the first six months of the year, KMI reported cash available to pay dividends of $807 million, 32 percent higher than $610 million reported for the same period in 2012. For the second quarter, KMI reported cash available to pay dividends of $294 million, down from $307 million for the same period a year ago primarily due to timing of cash tax payments. For the full year, KMI expects an 18 percent increase in the cash available for dividends over 2012 and, as previously announced, expects to declare dividends totaling $1.60 per share.

Chairman and CEO Richard D. Kinder said, "KMI reported strong results for the first two quarters of 2013 primarily due to continued strong performance at Kinder Morgan Energy Partners (NYS: KMP) , including contributions from KMP's acquisition of Copano Energy on May 1, 2013, and solid results at El Paso Pipeline Partners (NYS: EPB) , as well as from the natural gas assets obtained in the May 2012 acquisition of El Paso Corporation."

"Looking ahead, KMI is well positioned for future growth across our North American asset footprint," Kinder said. "We currently have identified approximately $14 billion in expansion and joint venture investments across the Kinder Morgan companies, and we are pursuing customer commitments for many more projects."

Outlook

As previously announced, KMI increased its expected declared dividend for 2013 to $1.60 per share from its 2013 published annual budget of $1.57 per share following the closing of the Copano acquisition. KMI's revised expected declared dividend per share represents an increase of 14 percent over its 2012 declared dividend of $1.40 per share. Growth in 2013 is expected to be driven by continued strong performance at KMP, along with contributions from EPB and the natural gas assets that KMI acquired in the El Paso Corporation transaction.

Other News

KMI's board of directors has approved a share and warrant repurchase program authorizing KMI to repurchase in the aggregate up to $350 million of its (i) Class P common stock or (ii) warrants to purchase shares of its Class P common stock, which are currently trading on the New York Stock Exchange. Repurchases may be made by KMI from time to time in open-market or privately negotiated transactions as permitted by securities laws and other legal requirements, and subject to market conditions and other factors. Under the repurchase program, there is no time limit for share or warrant repurchases, nor is there a minimum number of shares or warrants that KMI intends to repurchase. The repurchase program may be suspended or discontinued at any time without prior notice.

Kinder Morgan is the largest midstream and the third largest energy company in North America with a combined enterprise value of approximately $115 billion. It owns an interest in or operates approximately 82,000 miles of pipelines and 180 terminals. Its pipelines transport natural gas, gasoline, crude oil, CO2 and other products, and its terminals store petroleum products and chemicals and handle such products as ethanol, coal, petroleum coke and steel. Kinder Morgan, Inc. (NYS: KMI) owns the general partner interests of Kinder Morgan Energy Partners, L.P. (NYS: KMP) and El Paso Pipeline Partners, L.P. (NYS: EPB) , along with limited partner interests in KMP and EPB and shares in Kinder Morgan Management, LLC (NYS: KMR) . For more information please visit www.kindermorgan.com.

Please join Kinder Morgan at 4:30 p.m. Eastern Time on Wednesday, July 17 atwww.kindermorgan.comfor a LIVE webcast conference call on the company's second quarter earnings.

The non-generally accepted accounting principles, or non-GAAP, financial measure ofcash available to pay dividends is presented in this news release. Cash available to pay dividends is a significant metric used by us and by external users of our financial statements, such as investors, research analysts, commercial banks and others, to compare basic cash flows generated by us to the cash dividends we expect to pay our shareholders on an ongoing basis. Management uses this metric to evaluate our overall performance. Cash available to pay dividends is also an important non-GAAP financial measure for our shareholders because it serves as an indicator of our success in providing a cash return on investment. This financial measure indicates to investors whether or not we are generating cash flow at a level that can sustain or support an increase in the quarterly dividends we are paying.Our dividend policy provides that, subject to applicable law, we will pay quarterly cash dividends generally representing the cash we receive from our subsidiaries less any cash disbursements and reserves established by our board of directors.Cash available to pay dividends is also a quantitative measure used in the investment community because the value of a share of an entity like KMI that pays out all or a substantial proportion of its cash flow is generally determined by the dividend yield (which in turn is based on the amount of cash dividends the corporation pays to its shareholders). The economic substance behind our use of cash available to pay dividends is to measure and estimate the ability of our assets to generate cash flows sufficient to pay dividends to our investors.

We believe the GAAP measure most directly comparable to cash available to pay dividends is income from continuing operations. A reconciliation of cash available to pay dividends to income from continuing operations is provided in this release. Our non-GAAP measure described above should not be considered as an alternative to GAAP net income and has important limitations as an analytical tool. Our computation of cash available to pay dividends may differ from similarly titled measures used by others. You should not consider this non-GAAP measure in isolation or as a substitute for an analysis of our results as reported under GAAP. Management compensates for the limitations of this non-GAAP measure by reviewing our comparable GAAP measures, understanding the differences between the measures and taking this information into account in its analysis and its decision making processes.

This news release includes forward-looking statements. These forward-looking statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management, based on information currently available to them. Although Kinder Morgan believes that these forward-looking statements are based on reasonable assumptions, it can give no assurance that such assumptions will materialize. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include those enumerated in Kinder Morgan's reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they were made, and except to the extent required by law, Kinder Morgan undertakes no obligation to update or review any forward-looking statement because of new information, future events or other factors.Because of these uncertainties, readers should not place undue reliance on these forward-looking statements.

Kinder Morgan, Inc. and Subsidiaries

Preliminary Cash Available to Pay Dividends

(Non-GAAP, Unaudited)

(In millions)

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

KMP distributions to us

From ownership of general partner interest (1)

$

432

$

348

$

844

$

679

On KMP units owned by us (2)

36

27

72

53

On KMR shares owned by us (3)

20

18

40

35

Total KMP distributions to us

488

393

956

767

EPB distributions to us

From ownership of general partner interest (4)

51

32

100

32

On EPB units owned by us (5)

57

50

113

50

Total EPB distributions to us

108

82

213

82

Cash generated from KMP and EPB

596

475

1,169

849

General and administrative expenses and other (6)

(18

)

(13

)

(29

)

(16

)

Interest expense

(12

)

(8

)

(66

)

(85

)

Cash taxes

(260

)

(191

)

(254

)

(193

)

Cash available for distribution to us from KMP and EPB

306

263

820

555

Cash available from other assets

Cash generated from other assets (7)

76

124

187

135

EP debt assumed (8)

(71

)

(56

)

(158

)

(56

)

EP acquisition debt interest expense (9)

(17

)

(24

)

(42

)

(24

)

Cash available for distribution to us from other assets

(12

)

44

(13

)

55

Cash available to pay dividends (10)

$

294

$

307

$

807

$

610

Diluted Weighted Average Number of Shares Outstanding

1,038

843

1,038

776

Cash Available Per Average Share Outstanding

$

0.28

$

0.36

$

0.78

$

0.79

Declared Dividend

$

0.40

$

0.35

$

0.78

$

0.67

Notes

(1)

Based on (i) Kinder Morgan Energy Partners, L.P. (KMP) distributions of $1.32 and $2.62 per common unit declared for the three and six months ended June 30, 2013, respectively, and $1.23 and $2.43 per common unit declared for the three and six months ended June 30, 2012, respectively, (ii) 381 million and 340 million aggregate common units, Class B units and i-units (collectively KMP units) outstanding as of April 29, 2013 and April 30, 2012, respectively, (iii) 433 million estimated to be outstanding as of July 31, 2013 and 347 million aggregate KMP units outstanding as of July 31, 2012 and (iv) waived incentive distributions of $4 million for the six months ended June 30, 2013 and $7 million and $13 million for the three and six months ended June 30, 2012, respectively. In conjunction with KMP's acquisition of its initial 50% interest in May 2010, and subsequently, the remaining 50% interest in May 2011 of KinderHawk, we as general partner have agreed to waive a portion of our incentive distributions related to this investment from the first quarter of 2010 through the first quarter of 2013.

(2)

Based on 28 million and 22 million KMP units owned by us as of June 30, 2013 and 2012, respectively, multiplied by the KMP per unit distribution declared, as outlined in footnote (1) above.

(3)

Assumes that we sold the Kinder Morgan Management, LLC (KMR) shares that we estimate to be received as distributions for the three and six months ended June 30, 2013 and received as distributions for the three and six months ended June 30, 2012, respectively. We did not sell any KMR shares in the first six months of 2013 or 2012. We intend periodically to sell the KMR shares we receive as distributions to generate cash.

(4)

Based on (i) El Paso Pipelines Partners, L.P. (EPB) distributions of $0.63 and $1.25 per common unit declared for the three and six months ended June 30, 2013, respectively and $0.55 per common unit declared for the three months ended June 30, 2012, (ii) 216 million outstanding as of April 29, 2013 and 218 million estimated to be outstanding as of July 31, 2013, and (iii) 208 million aggregate common units, outstanding as of July 31, 2012.

(5)

Based on 90 million EPB units owned by us as of June 30, 2013 and 2012, multiplied by the EPB per unit distribution declared, as outlined in footnote (4) above.

(6)

Represents general and administrative expense, corporate sustaining capital expenditures, and other income and expense.

(7)

Represents cash available from former El Paso Corporation (EP) assets that remain at KMI, including TGP, EPNG and El Paso midstream assets for the periods presented prior to their drop-down to KMP, and our 20% interest in NGPL. Amounts include our share of pre-tax earnings, plus depreciation, depletion and amortization, and less cash taxes and sustaining capital expenditures from equity investees.

(8)

Represents interest expense on debt assumed from the May 25, 2012 EP acquisition.

Excludes $274 million and $284 million in after-tax expenses associated with the EP acquisition and EP Energy sale for the three and six months ended June 30, 2012, respectively. This includes (i) $94 million in employee severance, retention and bonus costs; (ii) $67 million of accelerated EP stock based compensation allocated to the post-combination period under applicable GAAP rules; (iii) $37 million in advisory fees; and (iv) $55 million and $64 million, respectively, for the three and six months ended June 30, 2012 for legal fees and reserves.

Kinder Morgan, Inc. and Subsidiaries

Preliminary Consolidated Statements of Income (1)

(Unaudited)

(In millions, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Revenue

$

3,382

$

2,167

$

6,442

$

4,024

Costs, expenses and other

Operating expenses

1,897

1,024

3,286

1,910

Depreciation, depletion and amortization

442

333

854

607

General and administrative

183

501

323

630

Taxes, other than income taxes

102

69

200

119

Other expense

(17

)

(20

)

(16

)

(18

)

2,607

1,907

4,647

3,248

Operating income

775

260

1,795

776

Other income (expense)

Earnings from equity investments

93

72

194

137

Amortization of excess cost of equity investments

(9

)

(2

)

(18

)

(4

)

Interest, net

(427

)

(291

)

(829

)

(470

)

Gain on remeasurement of previously held equity interest in Eagle Ford Gathering to

fair value

558

-

558

-

Gain on sale of investments in Express

-

-

225

-

Other, net

16

7

18

8

Income from continuing operations before income taxes

1,006

46

1,943

447

Income tax expense

(225

)

(9

)

(504

)

(105

)

Income from continuing operations

781

37

1,439

342

Income from discontinued operations, net of tax

-

47

-

97

Loss on sale and remeasurement of KMP's FTC Natural Gas Pipelines disposal group to fair value, net of tax